Don't let it get away!

One of the great maxims of traders and Wall Street pros is to follow the "smart money."

I'm not much for the thesis that institutional shoppers tend to make smarter investing decisions, but many of you who've read my ruminations on insider buying say you'd also like to know how the Big Money is betting. Your wish is my command.

Next up: Take-Two Interactive (Nasdaq: TTWO) . Are institutions bullish or bearish when it comes to this rebel video game publisher?

Take-Two Interactive may be known for its edgy franchises such as Grand Theft Auto, but as a business its appeal goes much further. Western-themed shooter Red Dead Redemption has sold more than 8 million units since its release last May, and NBA 2K11 has sold more than 4 million units since October, making it the company's top-selling sports simulator.

During the company's recently completed fiscal 2011 third quarter, 14 franchises contributed to results. Revenue fell 7.2% and non-GAAP net profit came up a penny short of last year's $0.53, yet both results soundly beat analyst estimates. A broader portfolio of titles is giving Take-Two a long-overdue growth boost.

Expect further diversification next year. Upcoming titles include extensions of the BioShock and Duke Nukem franchises and new action thrillers XCOM, Spec Ops: The Line, The Darkness II, and L.A. Noire. Also, in April, the kid-friendly Carnival Games side of the business will introduce Take-Two's first game supporting Microsoft's (Nasdaq: MSFT) hot-selling Kinect hands-free controller.

That's the good news. The bad is that diversification requires investment and Take-Two has a mixed history when it comes to producing free cash flow. (Though the company has produced more than $185 million in FCF over the past 12 months.) For the most part, Fools believe the company's investments will pay off:

"They've been dinged for being a [Grand Theft Auto] one-hit wonder for years now, but this year they'll see at a nice profit without one. Even without a GTA [series] announced for 2011, they should be able to exceed this year's performance. With a new (and very impressive) BioShock coming in 2012, as well as a likely GTA release, and perhaps a new [Red Dead Redemption], 2012 looks even better," wrote Foolish investor mugwump67 in October. The stock has nearly doubled since.

Institutional ownership history

Top Owners

2008*

2009*

2010*

Latest*

Icahn Capital LP

541,128

8,375,000

12,305,626

12,305,626

OppenheimerFunds

15,425,695

11,845,223

10,898,206

10,898,206

BlackRock

213,256

9,219,963

7,149,842

7,149,842

Harbinger Capital Partners

-

5,800,000

5,800,000

5,800,000

The Vanguard Group

3,357,637

3,615,426

4,348,555

4,348,555

TOP 25 TOTAL

31,964,772

61,578,173

71,001,267

71,001,267

Source: Capital IQ, a division of Standard & Poor's.*Indicates the number of shares owned.

Like Fools, most of the Big Money investors believe in a turnaround -- Carl Icahn most of all. His fund had been accumulating shares consistently through last year's Q2 and now controls 14.4% of the company, according to Capital IQ data.

Among fund managers, the highly regarded Westcore Select (WTSLX) fund opened a new position with 256,868 shares purchased in the quarter ended on Jan. 31. Manager William Chester's picks have beaten the S&P 500 by an average of 7.84 percentage points annually over the past five years. If he sees value at recent prices, it's worth taking closer look. Even if Icahn is done buying.

Take-Two isn't likely to get high marks for its ownership profile. Thanks to Icahn's ownership stake and increasing interest from the likes of Chester and his institutional investor peers, there isn't a lot of room left for Big Money buyers to get in on this stock.

And yet I like Take-Two's position among peers. Electronic Arts is too widely owned; Activision Blizzard has low and dropping institutional sponsorship. Take-Two strikes a balance between these twin towers of gaming that leaves plenty of elbowroom for individual investors buying in small chunks.

What's more, Take-Two's cheap valuation should convince more small investors to take a chance on the stock. Yes, I said cheap. Consider GTA. This is a franchise that's capable of generating $500 million in sales in one week. What's that worth? I'd argue at least $1 billion in market value.

Now consider the company's 2010 result. In a non-GTA year, Take Two produced $1.22 billion in revenue, nearly equal to its $1.32 billion in market cap. Do you really believe the stock will trade for a zero premium to revenue when a new GTA series is introduced? You know better. So do I, which is why I've rated the stock to outperform in my CAPS portfolio.

Do you agree? Disagree? Let me know how you would rate Take-Two Interactive using the comments box below. You can also recommend other stocks for me to evaluate by sending me an email, or replying to me on Twitter.

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Tim Beyers first began writing for the Fool in 2003. Today, he's an analyst for Motley Fool Rule Breakers and Motley Fool Supernova. At Fool.com, he covers disruptive ideas in technology and entertainment, though you'll most often find him writing and talking about the business of comics. Find him online at timbeyers.me or send email to tbeyers@fool.com. For more insights, follow Tim on Google+ and Twitter.